Summary of Packages and Mitsubishi joint venture negotiations

This case study basically tells about different phases in the buying deal of plant by packages
from Mitsubishi started in year 1992.There was a high demand in our country of Biaxial
Polypropylene film by different industries e.g. biscuit industry, food products industry,
pharmaceuticals industry and etc. BOPP is used in packaging of products to improve the shelf
life of products.
Packages was established in 1957 in Lahore and are specialized in manufacturing of paper,
board and packaging. Whereas Mitsubishi is the manufacturer of heavy machinery based in
Japan.
In1992 the demand for BOPP film was 5,035 tonnes in Pakistan.80% BOPP film had been
imported from Far East. Mostly the companies were using imported Bopp film so the was a
need to produce Bopp film locally. Keeping that in consideration the packages and Mitsubishi
entered into a deal of installing production plant of Bopp film. Until 1993 that deal was not yet
fanialised.As there were many ambiguities during negotiation between packages and
Mitsubishi. There are some similarities and differences in business cultures of two countries
Pakistan and Japan. That is discussed below:
Maintaining Harmony: Japanese are well known for maintaining harmony in social
relationships. A highly regarded Japanese social value called wa refers to the quality of
human relationships. Pakistani also value collectivistic norms including harmony and sharing of
warmth.
Personal Relationships: Both the Pakistanis and the Japanese values stress the importance of
friendly and close relationship between business partners. Personal relationships are
considered to be as important as the economic outcome of the project. Close personal
relationships between business partners lead to higher trust and better communication.
Long term time perspective: A major difference between Pakistani and Japanese negotiators is
based on the time perspective in business negotiations.
Role of the third parties: In Japan, business relationships are initially established through proper
connections and associated introductions. The third party is called shokaisha in Japan. Pakistani
companies usually depend on their own resources for introductions.
Anyhow, the negotiations were on track between packages and Mitsubishi.IN April 1992, Syed
Babar Ali visited Japan to propose a business relationship between the two companies. By early
May 1992, preliminary talks between packages and Mitsubishi began. During the negotiations
the management of packages had found the project unfeasible because of limited market
demand and chose not to pursue the proposal. In the first week of September 1992, the
Mitsubishi team arrived to open again formal dialogue between the two companies. As a part
of joint venture agreement, Mitsubishi wanted to add a clause which would hold packages
responsible for reimbursing Mitsubishis investment if the company suffered repeated loses in
operations. That condition was quite outrageous for packages management and the
disagreement continued between the two sides. At that time the packages became little unsure
about the technology offered by Mitsubishi and they also became interested in another
technology introduced by Bruckner, European company as they were offering the same
technology at a 20% lower price.
Alongside, the Mitsubishi kept on trying to convince packages to buy their
technology. In April 1993, negotiations began and Mitsubishi became little flexible on their
stance but still the Bruckners offer was more feasible. The packages management really felt it
non-professional approach towards deal. When it appeared as though they were at an impasse,
Mitsubishi offered packages an alternative to purchase a 6,000 tonne capacity plant at Y 720
million. That offer was acceptable and was providing economies of scale. The demand for Bopp
film was also increasing at the rate of 12% to 15% each year.
Syed Babar Ali decided to form a joint venture with Mitsubishi but the
ultimate decision was left to Mr. Javed Aslam.
There were many ups and downs in finalizing the deal and it should have been done very
quickly. There were different considerations on both sides which were almost settled. In these
kinds of negotiations parties always look for best possible options to gain maximum benefit.